Archer Daniels Midland Company (NYSE: ADM) today reported
financial results for the quarter ended September 30, 2011. The
company reported net earnings for the quarter of $460 million, or
$0.68 per share, up 33 percent and 26 percent respectively from the
same period one year earlier. Adjusted earnings per share1—which
excludes the impact of LIFO and other adjustments—of $0.58 was 13
percent lower than the prior year quarter. Segment operating
profit1 was $699 million, down 9 percent from the prior year
quarter.
“The first quarter presented a difficult and challenging market
environment,” said ADM Chairman and CEO Patricia Woertz. “Margin
conditions in our global oilseeds segment were generally weak, and
net corn costs were high. We offset some of these pressures with
good management of our commodity positions and by capturing
opportunities through our broad and diverse portfolio.”
“During the quarter, we acquired oilseeds facilities in Poland
and India, and expanded our agricultural services operations to
support exports. And we returned capital to shareholders through
dividends and share buybacks of $347 million,” added Woertz.
“Looking ahead, we see the margin environment modestly improving,
and we are optimistic about the long term.”
First Quarter 2012 Highlights
- Adjusted EPS of $0.58 excludes a LIFO
gain of $0.11 and debt exchange costs of $0.01.
- Oilseeds Processing profit declined $87
million amid a challenging global oilseed crushing environment;
however, ADM’s diverse oilseed portfolio helped offset some of this
weakness.
- Corn Processing profit decreased $162
million as net corn costs more than doubled from the prior year;
net corn costs for the quarter were negatively impacted by economic
hedging benefits recognized in prior quarters.
- Agricultural Services profit increased
$112 million on strong global merchandising results, including a
strong recovery of exports from the Black Sea region.
- Other businesses improved by $71
million on the strength of improved cocoa press margins and smaller
losses in the captive insurance subsidiary.
- ADM returned $347 million to
shareholders in the quarter, including buying back 8.6 million
shares for $240 million.
Adjusted EPS of 58 Cents, down 9 Cents
Adjusted EPS declined primarily as segment operating profit was
lower by $66 million ($46 million, after tax, or $0.07 per share).
Additionally, a higher outstanding share balance resulted in a
dilutive impact of $0.04 per share. Corporate costs this quarter
were similar to last year’s quarter, after excluding the impacts of
LIFO, losses on interest rate swaps, and debt exchange costs.
The company’s effective income tax rate for the quarter was 30
percent, based on the forecast geographic mix of earnings for
fiscal year 2012.
Diversity of Oilseeds Portfolio Mitigates Challenging Margin
Environment
Oilseeds operating profit in the first quarter was $221 million,
down $87 million from the same period one year earlier.
Crushing and origination operating profit fell $61 million to
$115 million. A weak margin environment for global soybean crushing
and European rapeseed crushing depressed earnings. That impact was
mitigated by stronger results from ADM’s North American softseed
businesses and South American origination.
Refining, packaging, biodiesel and other generated a profit of
$49 million for the quarter, down $27 million, as good North
American biodiesel demand and strong volumes and margins of protein
specialty products offset lower results from South America and
Europe.
Oilseeds results in Asia for the quarter were in line with last
year, principally reflecting ADM’s share of the results from equity
investee Wilmar International Limited.
Additional highlights from the quarter include:
- Purchasing a majority share of Elstar
Oils S.A., a leading Polish manufacturer of refined vegetable oils,
fats and biodiesel.
- Expanding operations in the growing
Indian oilseeds market through the acquisition of two soybean
processing facilities.
- Announcing plans to grow grain and
rapeseed storage capacity through the construction of four new
silos at Magdeburg, Germany.
- Shuttering a soybean processing
facility at Galesburg, Ill., consolidating production to more
efficient operations.
Corn Processing Portfolio Demand Remains Solid; Earnings
Impacted by Higher Net Corn Costs
Corn processing operating profit was $179 million, down $162
million from the same period one year earlier. Processed volumes
were up 5 percent, though overall net corn costs more than doubled
from the first quarter of last year.
Sweeteners and starches operating profit decreased $118 million
to $28 million, as higher net corn costs more than offset higher
average selling prices and sales volumes. Export demand for
sweeteners remained strong. Net corn costs for sweeteners and
starches were negatively impacted by corn futures economic hedging
benefits recognized in prior quarters.
Bioproducts profit in the quarter decreased $44 million to $151
million. Lysine and spot ethanol margins in the quarter were good.
Offsetting the margin benefit, ADM ownership gains were lower than
the prior year.
Agricultural Services Benefitted by Capturing Global
Merchandising Opportunities
Agricultural Services operating profit was $244 million, up $112
million from the same period one year earlier.
Merchandising and handling earnings increased primarily due to
stronger global merchandising results, including a strong recovery
of exports from the Black Sea region.
Earnings from transportation operations were steady despite
lower U.S. grain export volumes.
Additional highlights from the quarter include:
- Growing origination-through-export
network with a group of acquisitions and construction projects
along the Danube River in Romania.
- Supporting U.S. export capabilities
with plans to build shuttle-train loading elevators in St. Joseph
Township, Minn., and, through a joint venture, in Park River,
N.D.
- Expanding origination footprint into
Wisconsin by acquiring nine grain elevators.
Other Businesses Improve on Stronger Cocoa Press Margins,
While Timing Adjustments Impacted Results
In the first quarter, profit from ADM’s Other business units was
$55 million, up $71 million from the same period one year
earlier.
In other processing, which includes wheat milling, cocoa and
ADM’s equity share of Gruma, S.A.B. de C.V., profits rose $33
million to $59 million, on stronger cocoa press margins. Wheat
milling results remained strong. Results in the segment were
negatively impacted by $58 million in mark-to-market net timing
adjustments in cocoa. Last year’s results were impacted by a
similar amount of net timing adjustments.
Other financial increased $38 million mainly due to improved
results of ADM’s captive insurance subsidiary. This quarter, ADM
completed the sale of a majority stake of Hickory Point Bank,
FSB.
Current Landscape Assessment
The U.S. harvest is nearing completion, with a smaller crop than
last year. Global supply is adequate for soybeans and wheat, but
tighter in corn. Global demand for crops and agricultural products
continues to be solid. Global protein meal demand continues to
grow, driven by emerging economies. U.S. corn sweetener capacity
remains tight, driven by strong export demand. With positive
blending economics, U.S. ethanol consumption remains at maximum
blendable levels.
Ethanol spot margins should continue to be good in the near
term. The company is contracting with corn sweetener customers and
is optimistic for 2012 calendar year pricing and margins. There has
been modest margin improvement in soybean and rapeseed crush, and
ADM will continue to leverage the diversity and strength of its
oilseed business portfolio. More of the world’s demand for
agricultural commodities will be met with non-U.S. supply, and ADM
will leverage its global asset base to help meet this demand.
Conference Call Information
ADM will host a conference call and audio webcast at 8 a.m.
Central Time on Tuesday, November 1, 2011, to discuss financial
results and provide a company update. A financial summary slide
presentation will be available to download approximately 60 minutes
prior to the call. To listen to the call via the Internet or to
download the slide presentation, go to www.adm.com/webcast. To
listen by telephone, dial 888-522-5398 in the U.S. or 706-902-2121
if calling from outside the U.S.; the access code is 16376846.
Replay of the call will be available from 11:30 a.m. Central Time
on November 1 to November 7, 2011. To listen to the replay by
telephone, dial 855-859-2056 or 404-537-3406; the access code is
16376846. To listen to the replay online, visit
www.adm.com/webcast.
About ADM
For more than a century, the people of Archer Daniels Midland
Company (NYSE: ADM) have transformed crops into products that serve
vital needs. Today, 30,000 ADM employees around the globe convert
oilseeds, corn, wheat and cocoa into products for food, animal
feed, chemical and energy uses. With more than 265 processing
plants, 400 crop procurement facilities, and the world’s premier
crop transportation network, ADM helps connect the harvest to the
home in more than 160 countries. For more information about ADM and
its products, visit www.adm.com.
1 Non-GAAP financial measures, see pages 5 and 10 for
explanations and reconciliations
Segment Operating Profit and Corporate
Results
A non-GAAP financial measure
(unaudited)
Quarter endedSeptember 30
2011 2010 Change
(in millions)
Oilseeds Processing Operating Profit
Crushing and origination $ 115 $ 176 $ (61 ) Refining,
packaging, biodiesel and other 49 76 (27 ) Asia 57
56 1 Total Oilseeds Processing $ 221 $
308 $ (87 )
Corn Processing Operating Profit
Sweeteners and starches $ 28 $ 146 $ (118 ) Bioproducts 151
195 (44 ) Total Corn Processing $ 179 $
341 $ (162 )
Agricultural Services Operating Profit
Merchandising and handling $ 219 $ 103 $ 116 Transportation
25 29 (4 ) Total Agricultural Services
$ 244 $ 132 $ 112
Other Operating Profit Processing $
59 $ 26 $ 33 Financial (4 ) (42 ) 38
Total Other $ 55 $ (16 ) $ 71
Segment
Operating Profit $ 699 $ 765 $ (66 )
Corporate
LIFO credit (charge) $ 126 $ (123 ) $ 249 Interest expense - net
(76 ) (89 ) 13 Corporate costs (84 ) (73 ) (11 ) Debt buyback or
exchange (4 ) (4 ) Gains/(Losses) on interest rate swaps (31 ) 31
Other (1 ) 13 (14 ) Total Corporate $
(39 ) $ (303 ) $ 264
Earnings Before Income
Taxes $ 660 $ 462 $ 198
Total segment operating profit is ADM’s consolidated income from
operations before income tax that includes interest expense of each
segment relating to financing operating working capital. Management
believes that segment operating profit is a useful measure of ADM’s
performance because it provides investors information about ADM’s
business unit performance excluding certain corporate overhead and
impacts of its capital structure. Total segment operating profit is
a non-GAAP financial measure and is not intended to replace
earnings before income tax, the most directly comparable GAAP
financial measure. Total segment operating profit is not a measure
of consolidated operating results under U.S. GAAP and should not be
considered as an alternative to income before income taxes or any
other measure of consolidated operating results under U.S.
GAAP.
Consolidated Statements of Earnings
(unaudited)
Quarter ended September 30 2011 2010 (in millions)
Net sales and other operating income $ 21,902 $
16,799 Cost of products sold 20,868 15,991
Gross profit 1,034 808 Selling, general and administrative
expenses (407 ) (381 ) Equity in earnings of unconsolidated
affiliates 124 125 Investment income 40 24 Interest expense (113 )
(117 ) Other income (expense) – net (18 ) 3
Earnings before income taxes 660 462 Income taxes (199 )
(120 ) Net earnings including noncontrolling interests 461
342 Less: Net earnings (losses) attributable to noncontrolling
interests 1 (3 ) Net earnings attributable to
ADM $ 460 $ 345 Diluted earnings per common
share $ 0.68 $ 0.54 Average number of shares
outstanding 674 641
Other income
(expense) - net consists of:
Net gain on marketable securities transactions $ 5 $ 2 Debt buyback
or exchange (12 ) - Losses on interest rate swaps - (31 ) Other –
net (11 ) 32 $ (18 ) $ 3
Summary of Financial Condition
(unaudited)
September 30 September 30 2011
2010 (in millions) NET INVESTMENT IN Working capital $
15,619 $ 11,920 Property, plant, and equipment 9,655 8,908
Investments in and advances to affiliates 3,202 2,961 Long-term
marketable securities 306 816 Other non-current assets 1,006
1,265 $ 29,788 $ 25,870 FINANCED BY Short-term debt $
1,170 $ 1,721 Long-term debt, including current maturities 8,327
7,182 Deferred liabilities 1,882 1,580 Shareholders’ equity
18,409 15,387 $ 29,788 $ 25,870
Summary of Cash Flows (unaudited) Quarter Ended
September 30 2011 2010 (in millions) Operating
Activities Net earnings $ 461 $ 342 Depreciation and amortization
207 252 Other – net 114 (84 ) Changes in operating assets and
liabilities 1,305 (1,381 ) Total Operating
Activities 2,087 (871 ) Investing Activities Purchases of property,
plant and equipment (443 ) (335 ) Net assets of businesses acquired
(12 ) (2 ) Marketable securities – net 300 (214 ) Cash held in a
deconsolidated entity (130 ) - Other investing activities 36
49 Total Investing Activities (249 ) (502 )
Financing Activities Long-term debt borrowings 2 22 Long-term debt
payments (85 ) (34 ) Net borrowings (payments) under lines of
credit (663 ) 1,324 Purchases of treasury stock (240 ) (31 ) Cash
dividends (107 ) (96 ) Other (40 ) 4 Total
Financing Activities (1,133 ) 1,189 Increase
(decrease) in cash and cash equivalents 705 (184 ) Cash and cash
equivalents - beginning of period 615 1,046
Cash and cash equivalents - end of period $ 1,320 $
862
Segment Operating Analysis
(unaudited)
Quarter ended September 30 2011 2010
(in 000s of Metric Tons)
Processed
volumes
Oilseeds Processing 7,018 7,075 Corn Processing 6,111
5,834 Wheat and cocoa 1,881 1,885 Total processing
volumes 15,010 14,794 Quarter ended September
30 2011 2010 (in millions)
Net sales and other
operating income
Oilseeds Processing $ 8,326 $ 6,091 Corn Processing 3,293 2,155
Agricultural Services 8,666 6,926 Other 1,617 1,627
Total net sales and other operating income $ 21,902 $ 16,799
Adjusted Earnings Per Share A non-GAAP financial
measure
(unaudited)
Quarter ended September 30 2011 2010
Reported Earnings Per Share (fully-diluted) $ 0.68
$ 0.54 Adjustments: LIFO (credit)/charge (a) (0.11 ) 0.12
Debt buyback or exchange costs (b) 0.01 Loss/(Gain) on interest
rate swaps (c) 0.03 Start-up costs (d) 0.03 Adjust quarterly
effective tax rate to fiscal year average (e) (0.05 )
Sub-total adjustments (0.10 ) 0.13 Adjusted
Earnings Per Share (non-GAAP) $ 0.58 $ 0.67
For reference purposes, adjusted EPS by quarter for fiscal 2011
is as follows:
Quarters ended
Sep'10
Dec'10
Mar'11
Jun'11
FY'11
Reported
Earnings Per Share (fully-diluted) $ 0.54 $ 1.14 $ 0.86 $ 0.58 $
3.13 Adjustments: LIFO (credit)/charge (a) 0.12 0.25 0.04 (0.05 )
0.35 Start-up costs (d) 0.03 0.02 0.02 0.02 0.09 Gain on Golden
Peanut revaluation (f) (0.07 ) (0.07 ) Gain on Gruma bank share
sale (g) (0.07 ) (0.07 ) Debt buyback or exchange costs (b) 0.01
0.01 Loss/(Gain) on interest rate swaps (c) 0.03 (0.05 ) (0.01 )
(0.03 )
Adjust quarterly effective tax rate to
fiscal year average (e)
(0.05 ) (0.09 ) (0.06 ) 0.20 0.00
Early debt remarketing dilution impact
(h)
0.04 0.04
Sub-total adjustments 0.13 0.06
0.03 0.11 0.32 Adjusted Earnings
Per Share (non-GAAP) $ 0.67 $ 1.20 $ 0.89 $
0.69 $ 3.45
(a)
The Company’s pretax changes in its
LIFO reserves during the quarter, tax effected using the Company’s
U.S. effective income tax rate.
(b)
The pretax costs incurred to extinguish
or modify the Company’s outstanding debt prior to maturity, tax
effected using the Company’s U.S. effective income tax
rate.
(c)
The losses or gains on changes in fair
value of certain financial instruments that were held as
de-designated accounting hedges for long-term debt that was
re-marketed in fiscal 2011, tax effected at the Company’s U.S.
effective income tax rate.
(d)
The costs incurred related to the
Company’s new bioproducts plants included in Corn Processing, tax
effected using the Company’s U.S. effective income tax
rate.
(e)
The impact to each quarter’s EPS if the
fiscal year 2011 final effective income tax rate of 33% were used
each quarter.
(f)
The gain on the revaluation of the
Company’s equity interest in Golden Peanut as a result of the
acquisition of the remaining 50% interest, tax effected at the
Company’s U.S. effective income tax rate.
(g)
The Company’s portion of its equity
investee Gruma’s gain on the disposal of assets, tax effected at
the Company’s U.S. effective income tax rate.
(h)
The impact of applying the if-converted
method of calculating diluted EPS to the 44 million shares issued
in Q4 fiscal 2011. The if-converted method assumed that the shares
were outstanding at the beginning of the third quarter of fiscal
2011.
Adjusted EPS is ADM’s fully diluted EPS after removal of the
effect on EPS of certain specified items as more fully described
above. Management believes that Adjusted EPS is a useful measure of
ADM’s performance because it provides investors information about
ADM’s operations allowing better evaluation of ongoing business
performance. Adjusted EPS is a non-GAAP financial measure and is
not intended to replace or be an alternative to EPS, the most
directly comparable GAAP financial measure, or any other measures
of operating results under GAAP. Earnings amounts in the tables
above have been divided by the company’s diluted shares outstanding
for each respective quarter in order to arrive at an adjusted EPS
amount for each specified item.
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